EDITORIAL AND PUBLISHING

Frank G. Cannata Editor-In-Chief and Publisher

Carol C. Cannata Senior Vice President, Client and Creative Services

Charles J. Cannata Senior Vice President, Brand Strategy and Development

Doreen Borghoff Design Director

Sharon Tosto Esker Story Editor

Walter Geer III Consultant I Digital Media, 3rd-Geer

Eitai Tabari Developer and Producer I Digital Media, 4th Floor Design

Karen Stewart Executive Producer I Shadow Productions

Matt Stauble Photographer and Producer I Matt Stauble Media

Sheri Fitts Social Media Consultant I Shoefitts Marketing

CONTRIBUTORS

Robert Ingoglia Industry Analyst/Consultant I Radia Group LLC

Bob Sostilio Industry Analyst/Consultant

EDITORIAL ADVISORY BOARD

Keith Allison President and CEO I Systel Business Systems PO BOX 35910 I Fayetteville, NC 28303

Paul Hanna President I Blue Technologies 5885 Grant Avenue I Cleveland, OH 44105

Steve Reding President I C.A. Reding 4352 North Brawley Avenue, Suite 101 I Fresno, CA 93722

Andrew Ritschel Owner/President I Electronic Office Systems, Inc. 330 Fairfield Road I Fairfield, NJ 07004

Barry Simon President I Datamax7400 Kanis Road I Little Rock, AK 72204

Mark Steadman President and CEO I Stan’s Office Technologies 1375 South Eastwood Drive I Woodstock, IL 60098

Subscriptions I Advertising I Licensing I Back Issues I Feedback

fgcannata@cannatareport.com I cjcannata@cannatareport.com (973) 823-6314 (917) 514-9501

THECANNATAREPORT (ISSN: 0889-5880) is published twelve times yearly by Marketing Research Consultants, LLC, P.O. Box 180 Hamburg, New Jersey 07419. Phone: (973) 823-6314; Fax: (973) 823-6316; email: fgcannata@cannatareport.com. Editor and Publisher, Frank G. Cannata. All rights reserved. No part of this periodical may be reproduced in any manner in any language without the consent of THECANNATAREPORT. The information set forth herein has been obtained from sources believed to be reliable but is not guaranteed by THECANNATAREPORT and may be incomplete. THECANNATAREPORT’s expressed views and opinions are based on the foregoing and should be viewed in this context. Printed in the U.S.A. SUBSCRIPTION RATES for THECANNATAREPORT and Live Wire are $495 for one year. Single issues are $50. POSTMASTER: Please send address changes to THECANNATAREPORT, P.O. Box 180, Hamburg, New Jersey 07419.

THECANNATAREPORT

• 3 •

Cover Story

19 I Ricoh’s Convergence2013 Dealer Meeting Delivers

Part I: Fast Forward To The Future .... 19

Part II: Meeting The Press .................. 22

Part III: Coriddi Speaks Frankly .......... 24

Part IV: …And The Award Goes To .... 26

Features

5 I The New Paper Volume IncreaseLanda Projects 4.5% Annual Packaging Production Growth Through 2016

6 I Blue Technologies’ Smart SolutionAcquisition Key To MNS Adaptation And Autonomy

8 I PRINT 13: In Living ColorProduction Print Presses Fast Forward

Preview: Contrasting Core StrategiesTHE CANNATA REPORT Draws Colorful Conclusions........................... 10

EFI’s Dyanamic Domination Industry Leader Sets Production Print’s Most Vibrant Trends ............................11

Konica Minolta’s Production Print Cycle Top Tier Product Line Offers Total Product And Services Integration ....... 12

Ricoh’s 1 To 1 ApproachBreakthrough Manufacturer’s Creative Services Concentration ...................... 15

Xerox’s Commercial Attitude The Big “X” Makes Its Mark With Services-Led Strategy ........................ 16

Canon’s High Volume Inkjet Pioneer Feeds Market With Black-And-White And Color Workflow Consolidation ...................... 18

Defining AcquisitionsComprehensive Primer Covers Notable Historical M&As To The Document Industry ............................ .28

30 I THE CANNATA REPORT Hosts Most Heavily Attended Event28th Annual Awards And Charities Dinner Attracts 250+ Notables And Raises $130K+ For Leukemia Research

Departments

38 I Up Next THE CANNATA REPORT Covers Four Major Manufacturer Dealer Meetings

Quote:“You can take as much as you can from the generation that has preceded you, but then it’s up to you to make something new.”

Jackson Browne

November 2013

Inside

6

8

19

• 4 •

30

This article’s title itself is rather surprising, isn’t it? But, printing growth is something we have

been reporting all along. Printing is not going away. What is changing is the different substrates that people are printing on. So how does that correlate to what our title proclaims? In an October 2013 press release, we learned a little something about the folding-carton market, which is paper based.

The release was entitled “New Landa Folding-Carton White Paper Reveals 4.5% Annual Market Growth Through 2016.”

In case you were wondering what Benny Landa was up to, now you know. Landa has been busy developing a printing process that

employs nano particles. He dubbed his latest printer the first nano-graphic printing press. This product is aimed at the fast-growing folding-carton market.

To educate us on this new process and product, Landa released a white paper, “Accelerating the Growth of Packaging Production in the 21st Century.” The white paper provides an in-depth profile of the folding-carton segment.

According to the release, Landa plans to start shipping beta units of the S10FC Printing Press for folding-carton applications in the fourth quarter of 2014. We are a year away from testing, and Landa has let the cat out of the bag on what is coming. One thing is for sure, when it does

arrive, it will come with a great deal of fanfare — as it should.

Landa’s press is designed solely for the folding-carton production market and supports B1 (41”) format media and off-the-shelf substrates without any pretreatment or printing. If it works — a big if — the press will be a truly revolutionary and significant disruptor in that segment of the market.

Landa’s direct primary research, combined with reports from Smithers-Pira and Karstedt Partners, show that total annual consumption of cartonboard currently stands at 43 million tons, and generates $82 billion in revenue. Year-over-year growth is anticipated to be 4.5 percent through 2016.

The New Paper Volume IncreaseLanda Projects 4.5% Annual Packaging Production Growth Through 2016 By Frank G. Cannata

• 5 •

Landa S10FC

CR

On September 4, 2013, Blue Technologies, Inc. announced its acquisition of Smart

Solutions, Inc. — headquartered in Beachwood, Ohio, — effective September 1, 2013. In our opinion (through the lens of an independent dealer’s perspective), this acquisition is one of the most important announcements that has come across our desks this year.

Dealers know that acquisitions are

essential for expansion, particularly when we’re talking about Managed Network Services. This press release was so important because it reflects the growing interest in Managed Network or IT Services. However, that interest is not generating significant

adaptation or results. As I attend the major independent dealer group meetings, I am discovering that only a small number of highly active dealers (in terms of revenue and awareness of how to engage) are successfully engaging in MNS.

This release indicates that dealers are cognizant that one of the best ways to launch MNS is to acquire a company with employees who have the appropriate skills and a client

• 6 •

Blue Technologies’ Smart SolutionAcquisition Key To MNS Adaptation And Autonomy By Frank G. Cannata

Dealers know that acquisitions are essential

for expansion, particularlywhen we’re talking about

Managed Network Services.

base to establish a platform for the MFP dealer to transition into a fully conversant and active services provider.

Xerox, HP and Konica Minolta have done this, and dealers should do it, albeit on a smaller scale. Size is irrelevant. If an acquisition provides a dealer with two to three talented analysts and less than 100 clients, acquisition is still a far more sound strategy than starting from scratch.

Back To Blue

Blue Technologies acquired Smart Solutions, which is HP Autonomy’s top dealer in the United States. Smart Solutions is an IT solutions provider to clients in the education, legal, professional services, government and corporate sectors. The company provides managed services, comprehensive IT infrastructure consulting, document management solutions, and workflow optimization. This year, the company was named “North American Partner of the Year” by HP Autonomy.

HP Autonomy is focused on software that processes human information, or unstructured data. Autonomy also offers information governance solutions in areas such as eDiscovery, content management and compliance. In addition, HP Automory delivers marketing solutions that help companies grow their revenue, such as online content management, online marketing optimization and rich media management.

Founded over 30 years ago in 1983, Smart Solutions is an IT service provider that supports clients on both a regional and national basis. The company serves as a certified sales and solutions partner for over 20 IT hardware and software providers including HP (Platinum Partner), Autonomy (Gold Partner), Microsoft (Gold Partner), Aruba Networks, Citrix, VMware, Watchguard,

Polycom, DocAuto, RBRO, eCopy, Omtool and DocMinder.

Smart Solutions will become a wholly owned subsidiary of Blue Technologies and will be renamed Blue Technologies Smart Solutions. Bill Julka, President of Smart Solutions, will remain onboard as Vice President, and all employees will be retained during the acquisition. As a result, the combined revenues of the company will exceed $50 million.

Paul Hanna, President of Blue Technologies, is extremely enthusiastic about the potential this particular acquisition brings to the company, specifically stating, “We have been searching for the perfect acquisition for some time and after meeting Bill [Julka], seeing his company’s commitment to customer service and their passion for cutting edge technology, I knew this would be a great fit for the growth of Blue Technologies and Smart Solutions.”

This acquisition enables Blue Technologies to significantly expand its footprint across the IT space by more than doubling its knowledgible, skilled service and support teams. The expertise Blue Technologies brings to Smart Solutions includes solutions specifically designed for customers in the education, legal, government and corporate sectors.

Bill Julka, founder of Smart Solutions, is enthusiastic about his company joining forces with the locally owned and operated Blue Technologies. “After starting my company in Ohio, I am pleased to see Smart Solutions join with a company that shares the same values and deep ties to the community. I am eager to see the combined company continue to

grow as it serves local, national and international businesses, offering complete office technology solutions.”

Paul Hanna President, Blue Technologies

• 7 •

Editor’s Note: We would love to hear about any acquisitions that independent dealers are making. If we can be of any assistance in these efforts, please let us know. In most cases, we would recommend people like John Hey and Bob Goldberg to take you through the process. If you have trouble selling or buying a business, for financial reasons, that is where we can particularly helpful. We do not lend money, but can offer complementary advice on how approach and close a deal, as we have done so in the past for our subscribers. Most importantly, if a subscriber buys another dealer, let us know and we will even help you write a press release. You want to get the word out when you accomplish something like this because it will substantially help put you on the forefront of where the business is today.

This acquisition enables Blue Technologies to expand its IT footprint by more than

doubling its experienced, skilled service and support teams.

CR

• 8 •

PRINT 13: In Living ColorProduction Print Presses Fast ForwardBy Frank G. Cannata

Here we are two months later, writing about our experiences at PRINT 13, one of the

most significant shows of the year. Even though the meeting was held in Chicago from September 8–12, 2013, we have deferred our coverage until now, due to the first-ever double issue that reported on our annual dealer survey findings.

Extensive Innovation

If you want to be a serious player in Production Print, this show was the place to be. What made PRINT 13 special was the fact that it was the largest, most innovative exhibition of digital, offset and hybrid technologies available in 2013. It was the only show in this industry area that we attend given the valuable information we glean for our readers.

The BTA regional shows are equally important to many of the dealers. BTA designs these day-and-a-half shows to be brief and convenient so dealers do not have to take a lot of time from their businesses to travel. To boot, Brent Hoskins — BTA’s Executive Director — puts on a solid event with excellent keynote speakers.

The McCormick Place Convention Center’s expansive floor was the perfect venue for attendees to explore the latest in digital print devices, new applications, products and services for just about every facet of the graphic communications industry.

The show featured everything graphic communications professionals need to adapt and grow their businesses. Thousands of progressive print professionals seeking printing-related equipment, products and services attended PRINT 13 to visit any number of the 650 exhibitors on the show floor.

This was our own CJ Cannata’s first time out for what has historically been called Graph Expo. We hit the ground running on Sunday, September 8, and left on Wednesday, September 11. Neither CJ nor I were disappointed. We both came away with a sense that digital printing is vital and more relevant in many ways for dealers than ever before. There was a great deal of activity with a plethora of press conferences and evening social events. Exhibitors spared no expense to ensure that their customers and press were impressed.

Production = Productivity

The premise of PRINT 13 was all about helping printers increase their productivity, workflow and device optimization of everything on their shop floors. Every manufacturer wants to help printers do a better job of satisfying their customers.

In the way of new products and technology, inkjet was a main area of focus. Canon, Konica Minolta and Xerox all had something new to show. Meanwhile, Ricoh reminded PRINT 13 attendees that they know a great deal about inkjet and sell heads to just about everybody in the business.

Not to be boastful, but we have been telling anyone who would listen that inkjet is the new trend in hardware category. We were also reminded again how far ahead of the curve trend-setter EFI is in SuperWide design, product and front-end technology. The products EFI have acquired and are selling successfully are all inkjet-based. If anybody is paying attention, they are heads above the competition and are forcing the competition, as well as existing customers and prospects, to take notice.

Frankly Speaking

This was a substantial show, and we were pleased to see so many dealers

in attendance. I hope that we will see even more next year. If any of our readers are looking for guidance, direction or help with attending this event next year – please do not hesitate to call, email or shoot us a comment online.

We know how busy our subscribers are, especially given the number of meetings they are asked to attend. However, we believe that simply means dealers need to be increasingly judicious about where they choose to spend their time. If you’re a dealer and your aim is to succeed in Production Print, the first step is to say “yes” and book your trip to this highly valuable conference. You will likely face numerous challenges and miss important details in this vital print area if you don’t attend.

Production Print represents approximately 21 percent of the business today and that number is climbing. We hope to see you at McCormick Place next September. CJ and I will certainly be there.

• 9 •

PRINT 13: In Living ColorProduction Print Presses Fast ForwardBy Frank G. Cannata

• 10 •

EFI continues to successfully emphasize the importance of improving productivity and profitability in a highly competitive and dynamically changing marketplace...This company is showing all of us how to dramatically improve the performance of digital print devices by employing front-end technology and software.

We like what Konica Minolta is doing in this space. The company is acting, as opposed to simply talking in circles. KMBS has more than 80 employees in business development for print. While the company is focusing on its core business, Konica Minolta has really zeroed in on Production Print, with growing signs that they are making strong headway.

Xerox strives to be the best services provider for printers. This requires hardware-neutral consultative service that demonstrates applications with the highest degree of opportunity. Xerox’s do-it-yourself strategy, supported by case studies and white papers, reinforces its mission…One thing we always give Xerox credit for is its consistent messaging.

Ricoh’s message (similar to what we heard from Konica Minolta and Xerox) focused on helping print service providers deliver better service to their clients…Ricoh unveiled ‘1 to 1 Create Marketing Services’ featuring a new online-anchored platform to help commercial, franchise and in-plant print providers to efficiently deploy multichannel marketing campaigns for its customers.

Canon’s response to inkjet printing demand is a high-volume sheet-fed color inkjet digital press…The new Niagara digital press is intended to consolidate sheet-fed black-and-white and color workflows into one production printing system. Coming to market with a high-volume, sheet-fed inkjet digital press is a natural response to what other industry leaders are doing.

EFI (pg11)

Konica Minolta (pg12)

Xerox (pg16)

Ricoh (pg15)

Canon (pg18)

“ ““““

“

““

“

“Preview: Contrasting Core Strategies

THE CANNATA REPORT Draws Colorful Conclusions

• 11 •

We generally kickoff our experience at this show with the EFI press

conference that this Production Print manufacturer always hosts on the first day. The big news at this year’s conference was that eight of the company’s products won “PRINT 13 MUST SEE ‘EMS” awards. EFI continues to successfully emphasize the importance of improving productivity and profitability in a highly competitive and dynamically changing marketplace.

At EFI’s press briefing, CEO Guy Gecht spoke in cohesive detail about both the company’s recent and ongoing successes.

“EFI is especially mindful of the need to provide real value to our customers, most of which are independent, family-owned companies,” Gecht said. “It is our goal to help customers excel by automating their operations and by providing profitable new avenues for growth.”

I have attended every Graph Expo/PRINT show in Chicago for the past 15 years and within that period, I have attended every Connect Conference conducted by EFI. This company is showing all of us how to dramatically improve the performance of digital print devices by employing front-end technology and software. EFI took those messages further with its acquisition of SuperWide device manufacturer VueTek. Since that time, EFI has added Jetrion (which manufactures digital labeling presses) and Cretaprint (which delivers the ability to print on ceramic

tile) to offer a very broad array of devices that print on nearly every conceivable substrate.

Channeling Opportunity

Next year — at either Connect or Graph Expo/PRINT — I will be hosting a lunch for our subscribers that is dedicated to addressing what dealers must do to succeed in this valuable inkjet market that is pining for distribution. In this burgeoning segment, print is not declining — it’s growing. It’s a totally captured market and the margins on ink are robust. The inkjet technology driving the hardware is highly reliable, and the service burden is virtually non-existent. The problem with EFI is that the company has not conjured a way to offer independent dealers sufficient margins to make this all happen.

The entry-level cost for what is referred to as SuperWide is approximately $150,000, which should not be a stumbling block for the majority of our dealer audience. While these print engines can sell as high as $500,000, dealers prospectively have the added potential of selling the same dollar amount in ink over the course of just one year. More importantly, with EFI’s help, dealers can option machines with $100,000 software. If that is not an example of a perfect solution for what ails this industry, I don’t know what is.

Software Driving Hardware

EFI has accomplished what every hardware manufacturer is attempting. What separates EFI is that it has taken an opposite approach. EFI is a software company that took on hardware, highly diversifying its offering and adding substantial revenue to its bottom line.

When EFI initially purchased Cretaprint, the device was limited because users could not print different designs during the same run. However, EFI’s software solutions immediately increased productivity for end-users, as well as profit for itself. As such, we think there must be a coherent strategy to bring EFI and dealers together for what should be a major win for dealers. I have been saying this for quite a few years.

EFI’s Dyanamic Domination

Industry Leader Sets Production Print’s Most Vibrant Trends

Guy Gecht CEO, EFI

“EFI is especially mindful of the need to provide real value

to our customers, most of which are independent, family-owned companies,” said Gecht.

• 12 •

We attended the Konica Minolta Press conference and followed up with a

meeting with President and COO Rick Taylor and Kevin Kern, Senior Vice President of Marketing. As for the press conference, KMBS fired on all fronts. (Bear in mind that this was September 9, and the company had not completed the second quarter of its 2013 fiscal year.)

Kern gave us a detailed update on the revenue side, stating that KMBS had completed a very strong first quarter of 2013, with AllCovered’s

IT business representing 10% of revenue. We view this as good news, given Konica Minolta’s high stakes in this investment and its necessity to leverage the division for success with its independent dealers — not just for direct operations but for the company’s dealers as well. We’ll dive deeper into this issue when we cover the KMBS Dealer Meeting in our December issue.

Key Players

Konica Minolta’s Production Print product line is rapidly becoming

Konica Minolta’s Production Print Cycle

Top-Tier Product Line Offers Total Product and Services Integration

Defining Terms

Light Production Print entails short runs of simple jobs that do not incorporate variable data processing (VDP), as well as sophisticated finishing capabilities, that a digital press requires.

Short run — or Light Production — is 500 impressions or less (especially in color).

• 13 •

one the strongest in the industry. Xerox, Canon/Océ and Konica Minolta are the top three providers, in our opinion, with Ricoh quickly catching up. However, don’t get caught up in semantics. Some of the manufacturers are touting success in Production Print, when the category they are actually speaking to is Light Production Print. Big difference.

Konica Minolta’s C 1100 can perform up to 100 pages per minute and has the appearance of a Production Print device.

Maximizing Output

In our post-press conference discussion, Taylor and Kern were generous with their time, and we discussed many different aspects of the business.

According to Taylor and Kern, the message KMBS was looking to convey to the PRINT 13 attendees was that the company has a strong value proposition, which includes a total integration of hardware and services. As a result, KMBS has

been able to expand the printer and customer relationship.

While everyone is dealing with declining printer revenue, Konica Minolta is bullish on print and the company is making heavy investments in hardware, as well as software. All of its current IT investments are to support print. Fundamentally, we believe this is the right approach because a company that wants to succeed in this space must have solid front-end technology and solutions for workflow and special applications. Digital presses are expensive, so the key is to maximize utilization and potential for a commercial printer.

Actions Not Words

We are pleased to see what Konica Minolta is doing in this space. The company is acting, as opposed to simply talking in circles. KMBS has more than 80 employees in business development for print. Maintaining focus on its core business, Konica Minolta has really zeroed in on Production Print, with growing signs of making strong headway.

The message delivered by Taylor and Kern to us, as well as the rest of the industry, is being backed up by the KMBS dealers who have told us on many occasions that the sale of Production Print devices has increased their average unit selling price at a time when the AUSP is declining due to A4 penetration of the dealer space.

KMBS’s Secret Weapon

Of all the products at Konica Minolta’s booth, we believe the most important was the KM-1/IS29, which was showcased as a technology preview.

According to KMBS, this is the world’s first 23” x 29” digital inkjet press.

The KM-1/IS29 was co-developed by Konica Minolta and Komori. This product enables Konica Minolta to boast that its UV inkjet technology in conjunction with Komori’s expertise in precision manufacturing has produced an absolute winner. The printer is a device capable of high-speed output, superior color quality and reliable digital throughput.

“We are very excited to introduce the KM-1/IS29 to the U.S. market at PRINT 2013,” said Kosh Miyao, President and COO of Komori America Corporation. “The machine is truly a fusion of offset and digital technology that will be a game-changer in the printing marketplace.”

The KM-1/IS29 is a digital, UV color inkjet press that processes cut-sheet pages up to 29” in size. Fast outputs of 3,300 sheets per hour simplex, and 1,650 sheets per hour duplex, make the KM-1/IS29 ideal for fast-paced commercial printing environments where larger size cut-sheet pages are

Rick Taylor President and COO,Konica Minolta Business Solutions U.S.A., Inc.

Kevin Kern Senior Vice President, Marketing, Konica Minolta Business Solutions U.S.A., Inc.

Maintaining focus on its core business, Konica Minolta has

really zeroed in on Production Print, with growing signs of

making strong headway.

• 14 •

necessary and quality is important. The larger sheet size improves throughput and efficiency. The maximum page size of 23” x 29” enables six-up letter page layouts, a wide variety of gang runs and easy integration with existing production workflows, making it the ideal solution for short run, variable data (VDP) and fast turnaround jobs.

Imaging on the KM-1/IS29 is supported with “inkjet head,” “ink” and “process” technologies owned by Konica Minolta, a company that knows its way around in inkjet technology, digital printing and color management with toner-based printers. The latest inkjet head technology is said to enable superior image quality at 1200 x 1200 dpi, and the newly developed UV ink allows printing on coated or non-coated paper including standard offset paper without any pre-coating.

To support this new digital offering, Komori designed a new sheet transport system and a new cylinder configuration, as well as a new sheet reversal mechanism to enable high- speed two-sided printing. The KM-1/IS29 can instantly switch from single- to double-sided printing with no operator intervention.

“As the first of its kind in the marketplace, the KM-1/IS29 is ground-breaking technology for Production Print environments,” said Kevin Kern, KMBS’s Senior Vice President of Marketing. “Customers can count on Konica Minolta for industry-leading solutions that deliver superior performance and efficiency.”

Konica Minolta has targeted this product’s commercial availability to begin on or about late 2014, and it will determine more specific timing, as well as its kick-off country/region, at a later date.

Canon and Xerox are already pushing their own inkjet responses and will launch products comparable to what KMBS and Komori have developed. Ricoh is the world’s largest producer of inkjet heads and will most likely configure itself into this game as well. As we all know, the manufacturers with the best product — not necessarily the most expedient — will win.

What makes us so bullish on this new product? It is all about breeding, just like race horses. With KMBS and Komori’s combined engineering talents, experience and stability, they are potential progenitors of true disruptive technology.

KM-1/IS29

With KMBS and Komori’s combined engineering talents, experience and stability, they are potential progenitors of true disruptive technology.

• 16 •• 15 •

To be concise, Ricoh was very much a presence at PRINT 13. The company had its most popular products on display, and we think the success it is enjoying with the 5100 speaks for itself. Tim Vellek, Vice President of Ricoh’s Product Print, claims he cannot keep 5100s in stock. While Ricoh was slow to harness its acquisitions — Hatchi Print and InfoPrint — the company is more than making up for lost time.

Ricoh’s message (similar to what we heard from Konica Minolta and Xerox) focused on helping its customers provide better service to their clients. The consensus is that print service providers are trying to become marketing gurus for their customers. However, they lack an effective way to develop new service lines, technology and copywriting expertise.

To respond to this need, Ricoh unveiled “1 to 1 Create Marketing Services,” featuring a new online-anchored platform to help commercial, franchise and in-plant print providers efficiently deploy multichannel marketing

campaigns for its customers. This platform was announced during PRINT 13. However, it will not be available until early 2014.

Print providers will be able to use the “1 to 1 Create” website to create, launch, track, manage, modify and optimize ready-made marketing campaigns using tools to select stock graphics, target customers’ audiences, acquire mailing lists, set pricing and more. Ricoh has integrated all of these capabilities within the unified “1 to 1 Create” interface. The platform’s templates produce direct mail post cards, tri-fold brochures, flyers, counter cards, landing pages and email blasts targeted to organizations in vertical markets, which can include education, healthcare and retail, among others. Print providers can help their customers slice and dice audience targets by geography, age, income, family size and many other demographics. “1 to 1 Create” includes free case

studies and market-based value calculators from PODi, the digital print marketing industry association. The case studies will help businesses understand precisely how their print providers’ marketing campaigns can improve their business results. The value calculators will help providers price their services appropriately. The platform also includes campaign templates designed especially for key vertical applications, such as colleges, private schools, veterinary hospitals, physical therapy/rehabilitation clinics, spas, restaurants and (for self-promotion) print providers themselves.

Seeing that there is so much more to come from this company, we plan to revisit Ricoh’s Production Print plans after the first of the year.

Ricoh’s 1-To -1 Approach

Breakthrough Manufacturer’s Creative Services Concentration

Tim Vellek Vice President of Product Print, Ricoh Americas Corporation

• 16 •

We welcomed the opportunity to sit down with Gina Testa, who heads

up Xerox’s Production Print efforts. She is one very well-grounded Xerox executive. Testa reminds me of Gil Hatch, the former President of Xerox’s Production Systems Group who passed away in 2004. I always enjoyed talking to him because his responses always made sense to me and he never tried to baffle you with cow chips as opposed to providing a straight answer.

With customers are increasingly focused on day-to-day issues, Xerox is intent upon providing tools that can best leverage its own story. Xerox strives to be the best services provider for printers. This requires hardware-neutral consultative service that demonstrates applications with the highest degree of opportunity. Xerox’s do-it-yourself strategy, supported by case studies and white papers, reinforces its mission.

This company also wants to show commercial printers how to approach the market. Xerox believes it has a complete understanding of the transactional marketing space and it can impart such knowledge to the commercial printers that the company views as a distribution channel.

Ultimately, commercial printers are entrepreneurs who have to squeeze as much money as they can out of their equipment and shop-floor investments. The Xerox approach is consistent with its current mantra of being a services-led and a technology-driven company. The one thing I

always give Xerox credit for is that its messaging is always consistent.

Xerox’s Inkjet Push

On the show floor of PRINT 13, Xerox made every effort to show attendees why the company is the right production inkjet partner for a market that is expected to grow 21 percent annually through 2015. Headlining Xerox’s offerings were Impika products. It took me a while to recall when Xerox acquired Impika, so we reached out to our Xerox analyst Marcia DeMinco for a refresher.

Xerox acquired Impika on February 26, 2013. Impika has been very active in the design, production and sale of inkjet printing solutions used for industrial, commercial, security, label and package printing. It is a very good fit within the Xerox line and the company’s products address the growing packaging and label market.

Impika offers a portfolio of aqueous (water-based) inkjet presses based on proprietary technology. Impika product lines include iPrint, a range of continuous feed production printers that print at speeds as fast as 375 meters per minute, and iPress, a range of graphic communications digital presses with resolutions of up to 2400 x 1200 dpi. The company, based in Aubagne, France, sells its products to print providers through

its direct sales force and through a global network of channel partners, including Xerox, which has been reselling the Impika brand in Europe since 2011, and recently expanded to several developing markets.

In addition to Xerox’s existing xerographic production presses, the company developed and markets the world’s only high-speed waterless inkjet presses, the Xerox CiPress Production Inkjet Systems. IT Strategies pegs this area as a growth market, projecting an uptick of 21%.

Impika’s Influence

The acquisition of Impika has strengthened Xerox’s leadership in digital color production printing with scalable and flexible solutions. In

Xerox’s Commercial Attitude

The Big “X” Makes Its Mark With Services-Led Strategy

Gina Testa VP, Graphic Communications, Xerox Corporation

Impika is a very good fit within the Xerox line and the company’s products address the growing packaging and

label market.

• 17•

addition, Impika’s upgradeable options let printers customize their iPrint devices, selecting the colors, speed and resolution choices to fit specific production requirements. More than half of Xerox’s booth was dedicated to production inkjet technology, including the following.

Impika iPrint Compact

A single-engine, duplexing production inkjet system with a small footprint designed for transactional, transpromo and direct-mail applications. Customers can use either inkjet-treated papers with the system’s dye inks or plain paper with a new generation, high-density ink with minimal spread.

Xerox CiPress 500 Single Engine Duplex (SED) Production Print Inkjet System

Using waterless solid inks, the CiPress SED prints duplex jobs in a single frame at 500 or 325 feet per minute. Multiple ink optimization modes let printers increase or decrease the amount of ink needed for each application. Ink adjustments are made at the printer so the original job stays intact and moves quickly through the production process.

Impika iEngine 1000

Intended for commercial and industrial printing applications, the iEngine 1000

is a standalone print head and ink delivery system that can be mounted on many different production devices such as offset presses, inserters and envelope systems The device prints at 600 x 600 dpi resolution with speeds of up to 150 meters per minute (m/min) in color and 300 m/min in black and white.

Xerox’s Acquisition Acumen

If there is any company that has done as well as Xerox in acquiring disparate types of companies and integrating them into its corporation, please tell me. The secret is Xerox does not try to actually integrate the businesses it acquires. Instead, Xerox allows them to continue doing what they do best. This practice has worked with every acquisition Xerox has made since Textronix in 2000, and now includes XMPIE, Global, ACS and most recently, Impika.

Xerox recognizes the importance of inkjet in terms of holding onto the compnay’s share of the Production Print market and obtaining a company such as Impika was a logical means to that end. Impika fits Xerox’s needs and its overall strategy. Xerox is also quick to remind us of where the growth is — and, as we noted in our PRINT 13 overview, inkjet is indeed a growth market.

Impika iPrint Compact

• 18 •

Canon chose to spotlight its latest in inkjet design — dubbed Niagara — at PRINT 13. The Canon response to inkjet printing demand is a high-volume sheet-fed color inkjet digital press. The manufacturer previewed the machine for the press during a tour of its new headquarters facility in Melville, New York.

The new Niagara digital press is intended to consolidate sheet-fed black-and-white and color workflows on to one production printing system.

Shades Of Inkjet Expertise

Canon was an early pioneer of inkjet technology, accumulating broad and deep expertise in inkjet heads, paper and ink technologies. The company’s continuous feed color inkjet systems are known for its design and high-quality output. Coming to market with a high-volume, sheet-fed inkjet digital

press is a natural response to what other industry leaders are doing.

The Canon device features a patented four-color ink system (with a planned future extension of up to six stations). Niagara-based systems will provide B3 sheet-fed color inkjet printing on standard coated and uncoated offset media at anticipated production speeds of up to 3,800 duplexed B3 sheets per hour — and up to 8,500 duplexed letter sheets per hour — with volumes of up to 10 million letter size images per month.

The Niagara digital press will also offer an integrated end-to-end digital workflow built atop the Océ PRISMA

software platform, along with feeding, output and online finishing capabilities, managed by full process quality controls.

Canon’s Niagara is the result of input from several collaborators. Customers, industry experts and Canon development teams all worked together to shape capability priorities as well as various aspects of product concepts and processes for the project. IWCO Direct, on of the largest providers of direct marketing channel solutions in the United States — and a substantial Canon client as well — was one of such participant in the Niagara project.

In terms of availability, it is our understanding that Niagara will not be fully ready for launch until on or about Q4 2014, with full production slated for 2015.

Canon’s High Volume

Inkjet Pioneer Feeds Market with Black-And-White And Color Workflow Consolidation

Canon Niagara

Coming to market with a high-volume, sheet-fed inkjet

digital press is a natural response to what other industry

leaders are doing.

CR

•19 •

Ricoh’s Convergence2013 Dealer Meeting DeliversBy Frank G. Cannata

Part I: Fast Forward To The Future

Ricoh opened its action-packed, “Fast Forward” themed, two-day Convergence conference

with a traditional welcoming reception, followed by two general assemblies, several seminars and various one-on-one conversations with dealers.

All in all, we would rate this conference positively. Many of our industry’s important players were in attendance, including the vendors that do a very good job of supporting dealer’s efforts – namely, the leasing companies.

What impressed us the most was the fact that Ricoh had listened to feedback from its dealers and the press by cutting the general assembly down to 90 minutes, which included a keynote address. Rather than forcing too much information on the audience, Ricoh then held another general assembly on the following day.

This format made sense on multiple levels. Speakers were able to more effectively convey their messages and the audience remained engaged

and interested for the duration of the assemblies. As we observed the attendees, we noted that there was very little coughing, moving around or other physical indications that people had been sitting for far too long.

As for the seminars, we only attended one, focusing on the CHAMPs program in the Production Print area. We liked the fact that had one of their dealers, Dawn Abbuhl, co-owner of Repeat Business, presented her experience in seeking Ricoh’s assistance.

Abbuhl’s real-life, in-person anecdotes substantively brought Ricoh’s value proposition to life, and the presentation was very effective and well done. Tim Vellek, Ricoh Americas Corporation’s Vice President of Production Print, also addressed the seminar’s audience in tandem with Abbuhl.

We believe this two-pronged approach of including a dealer along with a company executive was an extremely effective way to convey Ricoh’s corporate message in a timely manner. I’ll say it again: Dealers love hearing from other dealers. Manufacturers should seriously consider doing more of these types of presentations at their meetings. I believe they will find a very warm reception from their dealers.

Proof Positive

This meeting generated a substantially positive sentiment compared with recent years. Dealers for Ricoh Family Group left this desert city with a far better feeling than three years ago. In 2010, it had seemed that Ricoh had lost its way. Challenged by its integration of IKON, Hitachi Print and InfoPrint, the company was a patchwork collection of silos — each having little in common with the other.

Adding to that already complex scenario, Savin, Lanier and Gestetner had been recently absorbed, rather than effectively integrated into Ricoh. Ricoh quickly became a Family Group of labels, with each embodying a different culture. It was

not surprising that onlookers gawked at the once proud Ricoh organization and pointedly labeled its struggles as the worst integration of disparate organizations that this industry had ever experienced. It has taken five years to figure out what went wrong and why the company appeared so disjointed — and, worst of all, unresponsive to both its employees and customers.

In retrospect, we can all learn a fundamental lesson about the rules of acquisitions, which are simple and inviolate. An acquirer must look for synergy among its acquired corporations or divisions. The acquirer’s culture trumps over all, or else the acquired companies risking being lost in the noise of a large

• 20 •

A Beautiful Aria

Toward the end of October is always a good time of the year to travel. The weather is generally more pleasant wherever you are heading for the most

part than it is on East Coast. In this case, we ventured out to Las Vegas to stay at a relatively new venue – the luxury Aria Resort and Casino.

The Aria is an extremely impressive facility with all the amenities an experienced traveler can expect. The only minor

inconvenience I encountered was when I checked out. I found $520 worth of charges for facial

treatments at the spa. However, I had no problem convincing the hotel that they

weren’t mine.

corporation, which is exactly what happened to Ricoh.

Each time Ricoh acquired a company – whether it was Savin, Lanier or IKON – it bumped the leaders of these businesses up to key roles in a newer and larger entity.

There was no single spokesperson (that the dealers could identify with) to express exactly what Ricoh was attempting to accomplish, where the company’es strategy was going and most importantly, why. Ricoh gutted its internal PR efforts, and the company slipped quickly downhill from there. The result was that the company transmitted a message that was inconsistent with its actions, and Ricoh lost credibility with its most important business partners — the independent dealer. Ricoh became reactive, then hunkered down and easily lost an estimated 20 percent (units) contribution from its independent dealers. That percentage may have well been more.

When Ricoh’s “rules of engagement” were first declared in 2010, they were intended to protect the dealer distribution. No one could describe or define exactly what these rules meant and how they were to be enforced. We were at a loss to either understand or explain the underlying causes of this seemingly indefensible strategy. It was a strategy that seemed intent on destroying Ricoh’s independent dealer distribution.

As industry watchers, we have come to rely on not what corporations have said, but rather what they do. It has been five years since Ricoh acquired IKON, and I finally figured out the major cause for all the difficulties. It was all about converting the huge IKON Canon machines in field (MIF). When it was acquired, IKON was a $2.3 billion company. We estimate the Canon MIFs represented approximately 60 percent of all IKON’s placements.

Ricoh had no choice but to expend every effort, every resource to convert that MIF. That effort caused them to lose customers and talented sales leaders, as well as experience serious erosion in IKON’s value. Not to mention that the bottom fell out of the market. Shortly after the acquisition, the U.S. tumbled into the worst economic recession since the Great Depression.

But, the coup de grace was former IKON CEO Matthew Espe’s departure from Ricoh. Actually, we think his leaving was a blessing in disguise. It was no secret Espe (while CEO of IKON) did not care for the Japanese companies he had to rely on for products. That Ricoh was unaware of his apparent dislike for its people and culture was more than surprising — it was startling.

Espe was able to negotiate one of the largest contracts ever awarded to any Ricoh employee. Once signed, the PR firm selected to promote this event convinced Forbes magazine that a feature spread containing images and that profiles of Kondo, Ricoh Company’s Chairman, and Espe would make a great story.

How, when, where or why Espe negotiated a contract with Armstrong that contained the elements of the Ricoh contract is unknown. However, once Ricoh signed the contract, Armstrong asked an assistant to notify Japan that he was leaving.

Left in disarray, Ricoh lost its focus and floundered. The cost of converting Canon MIF forced the company to downsize to affect the necessary economies. Many good people were let go, and we have to believe it was not due to a lack in performance or

talent but rather the size of their paychecks. The ramifications of these decisions are still being felt today.

Martin Brodigan, current President of Ricoh Americas Corporation, has assembled a good, capable team, comprising executives with a great deal of experience. The only question today is how cohesively they operate as a team. Each member of that team comes from a very different kind of business culture.

Despite its challenged recent history, Ricoh has been able to strengthen its product line and slowly regain its footprint among its dual-line dealers. Today, Ricoh states that 35.3 percent of all placements come from its independent dealers. The company’s goal is 40 percent. Time will tell if Ricoh can achieve it. In my opinion, the company has the ability to exceed that number. For now, Convergence was the right meeting, at the right time for Ricoh and its independent distribution.

• 21 •

Leasing Companies Fully Invested

By and large, leasing companies are supporting this industry in many ways and dealers would be hard pressed to run their own independent groups without their support. The relationship between the manufacturers and leasing companies is also mutually beneficial.

I would like to extend a sincere thanks to these companies – namely, GreatAmerica, De Lage Landen and U.S. Bancorp – for attending the majority of the meetings we attend and making them a much richer experience. It is no coincidence that these successful companies always come out among the top four of all leasing companies in our surveys.

Despite its challenged recent history, Ricoh has been able

to strengthen its product line and slowly regain its footprint

among its dual-line dealers.

• 22 •• 22 •

Part II: Meeting The Press

The Ricoh Convergence press conference was one of the best the company has presented in

my recent memory. Martin Brodigan, President and CEO of Ricoh Americas Corporation, included the company’s Senior Vice Presidents of Marketing and Sales on the dais with him, along with his CFO. These executives readily answered every question and kept the tone of the conference decidedly more congenial. From our viewpoint, Brodigan and his team were open and honest, freely sharing valuable information with their audience.

I cannot say it enough that when the lines of communication are open among all parties, good things can happen for everybody. This especially rings true when times are tough and those issues must be addressed

and explained. Manufacturers must remember that dealers are entrepreneurs first, last and always. All they really want from manufacturers is the truth.

Brodigan Breaks Through

Key Takeaways

While each panelist delivered their own segment’s state of the union, here, I’m focusing purely on Brodigan’s short and concise presentation.

• Ricoh has a strong global presence, especially within the United States.

• The Ricoh Group comprises 227 companies, with five regional headquarters in Japan, the Americas, Europe, Asia-Pacific and China.

Martin Brodigan President and CEO,Ricoh Americas Corporation

Ricoh Product Fair

• 23 •• 23 •

• The company’s annual sales in the U.S. are $20 billion.

• Ricoh currently employs 107,000 employees globally.

• Ricoh Americas employs over 27,000 people.

• 4,000 are sales professionals.

• 6,700 are service professionals.

• 8,000 are Managed Services professionals and employees.

• 800 are IT Services professionals and employees.

• Ricoh published 4,300 patents last year and currently holds over 46,000 patents worldwide.

Management’s Message

Turning to Ricoh’s business plan, Brodigan detailed four specific points that his management team is focusing on for 2014:

1. Focus on turnaround.2. Simplify business model.3. Redefine marketing strategy.4. Communicate direction.

Ricoh has made great strides in conveying its message that its dealers

are important. While Brodigan did a fine job of presenting, we believe he is strongest in a one-on-one situation and less so in a group setting. We noted that he has no problem looking you in the eye when you are asking a pointed question. He seems genuinely willing to answer and from what I see, he answers questions honestly.

As we all know, effectively communication is all about credibility. Right now, Brodigan and his executives have dealers believing they are credible executives. And that can only serve to help Ricoh overall.

Print And Mobility

The strongest segment of Brodigan’s presentation was a slide that indicated key statistics that point to our industry’s direction.

From Ricoh’s point-of-view, tablets are one of the most significant threats to printing. A noteworthy survey indicated that printing output has declined by 16 percent (my sense is that these results pertain only to cut sheet) due to both tablet adoption combined with companies’ measures to curtail printing.

This same survey further revealed that 46 percent of tablet users now print less, while 41 percent posited

that printing less was a “main benefit” of tablet adoption.

Mobile technology will continue to permeate the workforce. Brodigan’s presentation highlighted that the worldwide mobile workforce will increase to 1.19 billion employees in 2013, accounting for 34.9% of the workforce. The U.S. will remain the most highly concentrated market, with 75% of the workforce working with mobile devices in 2013, according to the IDC. Currently, the average mobile worker carries 3.5 devices, according to Forbes.

Mobile Workforce Proliferation

• 89% of the top 100 companies offer telecommuting.

• More than half (58%) of companies consider themselves a virtual workplace.

• Only 9% of employees worked at headquarters.

• 67% of all workers used mobile and wireless computing.

Source: Martin Brodigan’s Opening Session presentation

Ricoh Updates Org Chart

By sharing the company’s organizational chart, Brodigan effectively displayed the chain of command. However, if the object of this exercise was to convey the message that dealers are important to Ricoh, we believe Jim Coriddi should be reporting directly to the CEO, with a dotted line to Dave Greene, Ricoh’s Senior Vice President of Sales. But, that is not the current arrangement. Coriddi is currently reporting directly to Dave Greene.

Shortly after Ricoh’s Convergence, we spent some time with Jim Coriddi, Vice President of Ricoh

Americas Coporation’s Dealer Sales. We wanted to get Coriddi’s take on this recent dealer-focused event. I’d note that Coriddi seems to have become adept at handling questions from the press and he tends to stick to the script or the company’s message — you take your pick. At the same time, I do find him to be a credible source, as he truly understands the dealer business.

What kind of turnout did you experience at Convergence? Did it meet or exceed your expectations?

JC: There were 1,200 people at the general assembly. The audience consisted of well over 700 U.S. dealer owners and personnel. In addition, there were 75 people from Canada and South America. Heading into the

conference, we were hopeful that we would reach close to those numbers. The turnout certainly surpassed our expectations and it was a record number for us in every category.

In your initial planning of Convergence, what was the ultimate goal and do you believe you realized it?

JC: There were a few things where we wanted to do our best. First, we wanted to simplify the services-led approach and I would have to say that is what the conference was all about. Second, we wanted to take the CHAMPs program and put it in a position to be implemented. We wanted the dealers to fully understand what it is and what it is intended to be. You could say we wanted to make CHAMPs real. We wanted to display to our dealers our ongoing commitment to help them grow their business. You have to be careful [in

a situation like that] to not oversell but present it in a genuine manner. We are not only invested in CHAMPs but also have a sense of urgency to maintain our commitment over a period of time.

We also wanted to convey that there is sustainability to what we are doing. Convergence was intended to explain to the dealers the need for increased dedication from them. You can say we want more of their mind share. For us, to be successful going forward, the relationship between Ricoh and our dealers needs to be stronger and tighter so that we can exploit every resource when we go in front of the customer. That separation between manufacturer and dealer a thing of the past. As a result of that, we expect our dealers to accept the fact that in the end, the most efficient way they can go to market is as a dedicated Ricoh dealer.

Many significant dealers attended, but were you disappointed by some of the no-shows?

JC: No, not really. There were a few of

• 24 •• 24 •

Jim CoriddiVice President of Dealer Sales, Ricoh Americas Corporation

CR

CR

CRPart III: Coriddi Speaks Frankly

• 25 •• 25 •

the more notable dealers missing, but I talked to most of them before the meeting. These dealers sent a lot of people in their place. At the end of the day, they are running very large businesses, and I understand they are doing what they need to do. But as long as they are sending key representatives of their companies, I am good with that.

How do you believe the dealers responded to your message? What was the initial feedback you received from those you had an opportunity to talk to?

JC: In general, I think I have not had an opportunity to reach out to a number of dealers. I think you are on point, and what you are asking is a legitimate question. The few that I spoke to were very positive in their responses, and generally you can get a sense if the audience was responding to the message or not. At this stage, I am very pleased but intend to have conversations with many of these dealers over the course of the next few weeks.

If there was one thing that stood out in terms of success or failure, what would that be? In other words, what do you think went exceptionally well or exceptionally wrong?

JC: More than anything, I think it was the fact that our dealers recognized what we talked about is what we have done and not what we are going to do. I think there was positive energy. I think they believe and have seen the proof of what we have been talking about. The consistency [of our message] was a motivation to them and Ricoh as a partner is for real. They believe in what we are saying and doing. For that reason, I would have to say we did exceptionally well.

What was the first Ricoh dealer meeting you attended and how was Convergence different?

JC: The first Ricoh dealer meeting was Agenda. For one year, I worked for Jim Ivy’s office and wrote the speeches. I was very involved from the first meeting and at the time, Ricoh was not going through a good time with products. The dealers were not happy – we had too many holes in our product offering. At that first Agenda meeting, we launched our first digital color printer.

I guess the difference between Agenda and Convergence was that Agenda did not have the impact that this Convergence did. Ricoh was trying to catch up, and dealers were not that happy with what we were providing. From a technology and product standpoint, we are now in a very strong position. Convergence demonstrated that we have everything we need to take over the marketplace. And I think those are the main differences.

Did you conduct a dealer exit survey? If so, is there anything you can share with us about what they liked and what they did not like?

JC: The dealer survey will be done shortly. At this point, we really do not have anything to share with you.

Going forward, what do you consider as your first order of business post-Convergence?

JC: I have a national call set up and we are going to talk about the follow-up to CHAMPs and Monster In The Box. We are going to establish targets. One of those targets is the goal we have for CHAMPs engagement — we are going to provide a Convergence in a box — which are actually excerpts from the general session. These excerpts will stress the main points of the meeting and reinforce our message. For those who were unable to attend, it should give a very clear picture of what the meeting was all about.

As 10 of the dealers who received awards are subscribers of ours, and two who were in contention are as well — is there any message you would like to convey to them and to all of our Ricoh Family Group dealer subscribers?

JC: I don’t have anything that differs from the comments I made at Convergence – but if there is anything, it would be a thank you and a real appreciation for what they do every day. We have the strongest dealer network. We can do a great deal together. We highly value our dealer network. We are looking at the near-term future together. I want to review those success stories. What some of those dealers are doing is truly amazing. While everybody is talking about how tough it is, many of these dealers are doing extremely well. We can all learn a lot from them and together, go ever further.

To wrap up, we’d like to thank Jim Coriddi for his time. We commend him for what he has accomplished over the last three years. Coriddi’s appeal for a higher degree of dedication was a good message and something dealers needed to hear. If looking at our recently published dealer survey, only 19 percent of dealers are dedicated and I would agree that if manufacturers and dealers can develop better relationships, dedication would be a win for both parties. However, under current industry conditions, I cannot advocate a policy of dedication without very strong commitments from manufacturers. Dealers are still complaining about manufacturers’ branches (although not necessarily one that has the same label), in which case they are in a no-win situation. When a branch is carrying the same label as the dealer, then it is close to impossible to advocate dedication.

CR

CR

CR

CR

CR

CR

Convergence WinnersThe following are some of the dealers who received awards or recognition for their performance on behalf of Ricoh Americas Corporation at its manufacturer’s 2013 dealer meeting:• Advanced Business (2 awards) • Applied Imaging• ASI • Documation• Metro Sales • MT Business (2 awards) • Pacific Office Automation• RJ Young• TGI

• 26 •

Part IV: …And The Award Goes To…Ricoh’s 2013 Convergence dealer meeting allowed me the great honor of presenting THE CANNATA REPORT’S Manufacturer of the Year Award to Hede Nonaka, Ricoh’s Senior Vice President of New Business Development. Nonaka is an old friend of mine, and I was glad that he was visiting from the factory so I could deliver our award directly to him.

At our annual Awards and Charities Dinner on October 16, 2013, Dawn Abbuhl, President of Repeat Business Systems, gave a meaningful introduction to the award and elaborated on the valuable

relationship between Ricoh and its dealers. She also presented the award to Dominick Pontrelli, Ricoh Americas Corporation’s Vice President of Marketing. As much as I enjoyed presenting to Nonaka, I think Abbuhl’s presentation at our dinner captured Ricoh’s importance in our industry and their success better than mine did at Convergence.

Every dealer meeting concludes with a gala awards dinner. The press is invited to all except one (not including Canon). We enjoy these events as we see firsthand who the leading dealers are for various manufacturers.

Frank G. Cannata presents Hede Honaka with Ricoh’s “Manufacturer of the Year Award”

CR

• 27 •

Below: Select subscribers to THE CANNATA REPORT and TheCannataReport.com receive their respective FY 2012 National Awards of Excellence flanked by Ricoh Americas Corporation executives Jim Corridi, VP, Dealer Sales; Dave Green, SVP, U.S. Sales; and Martin Brodigan, President and CEO – along with comedian Kevin Nealon, whose accessible and upbeat brand of humor served only enhanced and complemented evening’s celebratory tone.

From left to right: Green; Corridi; Hunter McCarty, CEO, RJ Young Company (Commercial and SMB Growth Award recipient — Ricoh brand); Nealon; and Brodigan

From left to right: Corridi; Greene; Jeff Elkin, President, Advance Business Systems (B2C Sales Award recipient – Savin brand); Nealon; and Brodigan

• 28 •

Acquisition: ac·qui·si·tion

noun \ a-kw - zi-sh n\

Why An Acquisition?

Let’s call it “synergistic acquisition,” which means knowing who the buyer is (in our case the IT industry) and more than likely knowing who the target company is. To me, “acquisition” is the adverb and adjective form of the word “quick” — a quick method to increase a company’s top line revenue; in quick manner to retain one’s installed base, while simultaneously expanding a product line; or a quick way to offer new opportunities and deliverables.

The alternative to an acquisition is growing organically to increase revenue, base, time and an inordinate amount of human and financial capital. Organic growth works best when there is market expansion and projected periods of continued growth, much like what we experienced in the document/IT markets in the late ‘70s, up to the early ‘90s.

But now, we are in the midst of a new economy — anemic to flat for its fourth consecutive year after a painful recession that saw 4.3 million jobs eliminated. Today, our country is left with a 63 percent workforce-participation rate. Unemployment is expected to remain above 6 percent for the next four years.

In our industry, monochrome page volumes have declined dramatically for both MFPs and printers. Many full-time employee jobs have been replaced with automated business processes and workflow applications. Hardware replacements are expected drop to less than 40 percent. Many forecasters

are projecting more negativity with fewer new prospects and declining monochrome page volumes.

In short, there is not enough time, manpower or patience to organically grow businesses today. And if you’re not growing that will only hasten a declining rate of return and ultimately, cost you your dealership.

Notable M&As Synergistic acquisition is a merger and acquisition (also referred to as M&A) that is defined in many an MBA course as a strategic tactic used when one wishes to quickly grow a company. The most obvious and largest of the successful M&As include Disney and Pixar, Exxon and Mobil, and JP Morgan and Chase. Of course, many more M&As failed before they could succeed.

Merging two organizations with opposing cultures, different management styles or accounting practices can be a challenge over a short period of time and frustrated hedge fund investors with little patience often scuttle the deals.

There are many aspects — in addition to culture, management and accounting — to consider in an M&A. In our industry, one of the biggest issues that is often overlooked during

due diligence in the IT channels has been understating the book value of assets versus the true market value of the company being acquired. We saw this gaffe in the early stages of dealer acquisitions during the ‘70s, when rentals and leases were handled like equipment under service agreements, with little consideration of residual values. Today, it’s best that a banker, lawyer, CPA and Ouija Board master handle that part of the acquisition.

Document Industry Acquisitions

In April 2011, I wrote an article for THE CANNATA REPORT that focused on the acquisition environment of copier dealers from the ‘70s through the early 2000s. Those years saw an ample number of mega-dealers capable of acquiring (or being acquired), and the market indices were all pointing in a positive direction (page volumes, unit placements, hardware and supply margins, etc.) to show continued growth over the next 10 years.

However, in the last 10 years, we have seen a reduction in the number of dealerships, which can be partially attributed to the dwindling number of manufacturers and sales companies (24 in the ‘80s compared with 13 today) and companies like Ricoh shedding some of its smaller acquired properties back to dealers and Canon expanding its direct channel.

Acquisition: ac·qui·si·tion noun \ˌa-kwə-ˈzi-shən\1. the act of acquiring 2. something or someone acquired or gained <the team announced two new acquisitions>

Defining Acquisitions Comprehensive Primer Covers Notable Historical M&As In The Document Industry By Bob Sostilio

• 29 •

In the past, one type of target dealership within the office equipment industry was the one unable to expand due to the lack of critical mass, funding, technical or sales skill. The acquirers of these targets were reassessing their focus on the direct channels and major accounts as well, and were seemingly unwilling to expend investment in the non-recurring-growth dealership. We know of one manufacturer that would not send a live rep to visit more than 100 of its dealers because of their small orders, and instead opted to call them by phone once a month.

Keep in mind, the acquirers of dealer hardware and now software have a new set of objectives: access new markets; reduce competition; increase market share; achieve greater economy of scale; spread out engineering and development costs; save the installed base; and increase geographical coverage.

Synergistic acquisitions by manufacturers are exemplified by Xerox’s acquisition of Global Imaging Systems in 2007, Ricoh’s 2008 purchase of Ikon, Canon’s 2010 acquiring of Océ, and Konica Minolta’s 2011 purchase of All Covered, a managed IT service company. Xerox’s acquisition of GIS is the closest to being a textbook acquisition, juxtaposed to Ricoh’s purchase of Ikon that has been nothing short of painful at all levels.

By acquiring GIS in 2007, Xerox realigned its distribution, leaving expanding the dealer channel up to GIS, which put Xerox in a stronger position to acquire Affiliated Computer Services in 2009. That second acquisition by Xerox propelled it into the services business overnight. This situation was much like what Konica Minolta accomplished by acquiring a core IT-managed service company, All Covered, and by giving it the autonomy to expand its own geographical coverage. And Canon,

badly wounded by the loss of Ikon, positioned the Océ acquisition to strengthen its direct channel to better sell its color products. Canon continues to derive more than 50 percent of its revenue from its office equipment sector and 40 percent from its imaging sector (cameras, etc.).

Today, as the core black-and-white document imaging business declines at market speed offset only by partial replacements with color sales, both Konica Minolta’s and Xerox’s services revenues have multiplied, while some 88 percent of Ricoh’s annual revenues is still dependent on hardware sales. Even though Ricoh has finally shown a profit since the IKON acquisition, it still lacks significant “services” revenue.

Dealer Acquisitions

Looking at dealers who have successfully acquired other office equipment dealerships, they have done so by selecting targets that would provide an immediate recurring revenue stream within their own footprint. By taking on smaller dealers — normally under $3 million in annual sales — the acquirers were able to leverage the target’s machines-in-field. The acquired service force was able to be utilized for on-site repairs, while the acquiring dealer’s sales reps scoured the new population for color, Managed Print Service, Production Print and IT services candidates.

In most cases, the acquired sales forces were not retained. Managed Services took off, but lately, this segment has been challenged when companies start opting out of owning any document or computing equipment, preferring to hand this type of service off to a third party. Sales forces under the office equipment dealers managed services agreements were retained, the balance went to non-equipment service companies.

Today, aside from the worries associated with running a company

with more than 50 employees, dealers who want to grow have to look beyond simply acquiring the hardware candidate and into acquiring expertise or outright companies involved with “mobility management of data,” “cloud computing,” “data security” or “Big Data management.” Don’t overlook 3D printing, not as a replacement but as a new product to penetrate manufacturing, robotics or product development companies. These are just a few of the areas of expansion that a dealer’s customers are considering and looking to the independent dealer for help.

Other areas for consideration include the virtual office that 60 percent of U.S. corporations are implementing. Dealers need to ask themselves: How can I support these new trends? Is there something I should be offering my customers that I am not? Can I provide training, support and or services to my customers today? Is there an acquisition candidate that is providing answers? The hardware and page-volume business model is not dead yet, but it has to be augmented with new revenue streams forecasted to “grow” rather than continue on a path of diminishing returns.

My 2¢

My observations and suggestions are by no means an exacting science, but ones that I have formulated by pooling multiple sources of information for years and providing guidance that has resulted in profitable outcomes. I look at a number of public sources and overlay them with research data that shows our industry is rapidly shedding hardware loyalty and looking for companies that can support internal initiatives revolving around mobility, big data and security. Don’t look at what customers are asking for today – that should already be in your warehouse or service offering, but your skill set that supports growth — for them and you — for tomorrow.

Acquisition: ac·qui·si·tion

noun \ a-kw - zi-sh n\

CR

• 30 •

We held our 28th Annual Awards and Charities Dinner on Wednesday,

October 16, 2013, and we are still receiving donations at press time. This was the second year we focused on the Maryann Ingoglia Memorial Research Grant in Leukemia. Last year, we raised $75,000 for the Hackensack University Medical Center. We made a commitment to work with them again in an attempt to raise $150,000 in total. To say that we could not be more pleased would be a vast understatement. To our amazement, we exceeded $200,000 in donations between this year and last, and we are still waiting for a final accounting from HUMC.

We hosted over 250 industry notables who comprised a “Who’s Who” in the industry, and it was by far, our most heavily attended event. If there were any major industry players who did not attend, I could not tell you who they were.

Our Sincere Thanks

We extend a special thanks to Larry Weiss, President of CDA, and Bill Fraser, a CDA member, for promoting our event and asking us to reschedule it from September to October this year. They wanted our dinner to coincide with their CEO meeting in New York City on October 17 and 18.

THE CANNATA REPORT Hosts Most Heavily Attended EventBy Frank G. Cannata

• 31 •

We would also like to thank Everbank, which took care of the cost of transportation for over 70 CDA members, along with many of their spouses.

Lastly, please allow me to thank Mike Stramaglio of MWAi, Martin Brodigan of Ricoh, and Rick Taylor of Konica Minolta, who were the leaders in terms of donations followed by Keith Allison from Systel, Larry Weiss of Atlantic, Rick Bastinelli of Centric, and Lou Scantland of Documation. The donations from these industry leaders alone represented $74,000 of the approximately $135,000 raised that evening.

Stramaglio, in particular, made a special presentation to Bob Ingoglia of the jacket he wore when he rode for Maryann as a part of Rolling Thunder, the huge bike motorcade that winds its way into Washington, D.C., in honor of all those who have served and those who have paid the ultimate price for our liberty. Stramaglio made the commitment to raise money for Maryann’s research grant, and his effort was particularly

heartfelt. Bob Ingoglia was truly humbled by the outpouring of love and genuine affection shown to him and his beloved late wife. Again, we thank Mike Stramaglio for his efforts.

While there are several others who deserve our sincere thanks, to mention everyone who was instrumental in helping make this event the most successful we have ever had would take up an entire issue. I hope that those of you whom we did not mention will understand, and please know that you have our sincere heartfelt thanks. We could not have done this alone.

Lifetime Achievement

The highlights of the evening were the acceptance speech by Katsumi (Kirk) Yoshida, former Chairman Ricoh Americas Corporation (now retired), upon receiving our Lifetime Achievement Award and a brief yet powerful speech by John Fernyak of MT Business. Yoshida had me in tears when he spoke of his love for America, and all the people he knew and worked with during his long tenure in the United States. And Fernyak

clearly demonstrated how much he valued the contribution Yoshida made to MT’s success.

This is only the ninth time we have given the Lifetime Achievement award in 28 years — we choose to present it when specifically warranted. This year, we not only chose a worthy recipient, but a noetworthy presenter as well. The Funny thing is that Fernyak does not consider himself a great speaker. What he discounts is how definitively his integrity and honesty come through when speaking publically.

In closing, we’d once again like to thank CDA and all of you who were so kind, forthcoming and generous in supporting our philanthropic efforts — not only this year, but in all the previous years we have added that focus. Carol, CJ and I can never express our appreciation enough.

Most importantly, we know in our hearts how much all of this would have meant to Maryann.

• 32 •

Above: Frank G. Cannata, Editor-In-Chief and Publisher, THE CANNATA REPORT, and emcee of the event.

Left: Jim Orrichio, President, Coordinated Business Systems, presents Ed Bialecki, SVP, Sales, Kyocera Document Solutions America, Inc., with the “Printer Manufacturer of the Year” Award.

Bottom (left): Ben Russert, CEO, ProSource, presents Jim D’Emidio, President, Muratec America, Inc., with the “First in Class Manufacturer of the Year” Award. Below: Dr. Andre Goy, M.D., M.S., Chariman and Director, Chief of Lymphoma and Director, Clinical and Translational Cancer Research, John Theurer Cancer Center at the Hackensack University Medical Center.

Awards And Charities

Dinner Presentations

• 33 •

Above (left): John Fernyak, President, MT Business Systems presents Kirk Yoshida with the Lifetime Achievement Award.

Top (right) Frank Cannata and Kirk Yoshida.

Right: Paul Hanna, President, Blue Technologies, presents Rick Taylor, President and COO, Konica Minolta Business Solutions U.S.A, Inc., with the “Executive of the Year” Award.

Bottom Right: Dawn Abbuhl, President, Repeat Office Systems, presents Dominic Pontrelli, SVP, Marketing, Ricoh Americas Corporation, with “MFP Manufacturer of the Year” Award.

Below: Mike Stramaglio, President and CEO, MWAi, makes his Memorial Presentation to Bob Ingoglia.

• 34 •

Above (from left to right): Jerry Blaine, President and CEO, LDI ColorToolBox; Bill Fraser, CEO, Advanced Information Systems; Susan Fraser; Marylin Blaine.

Left (from left to right): Bob and Gail Sostilio; Mike Stramaglio; Gavin Williams, EVP, SAP Business Unit, MWAi; Bob Goldberg, General Council, BTA.

Bottom (left) (from left to right): Jerry Blaine, President and CEO, LDI ColorToolBox; Rick Taylor; Tom Taiko, Chairman and CEO, Konica Minolta Business Solutions, U.S.A.,

Below: Frank Grasso, President and CEO, TGI

Awards And Charities

Dinner Reception

• 35 •

Above (from left to right): David Pohlman, EVP and COO, GreatAmerica Financial Services; John Kuchta, President, SolutionOne; Jim Fuchs, President and CEO, Business Solutions.

Top (right): Laura Blackmer, SVP, Sales (left), Doug Albregts, President, Sharp Imaging and Information Company of America.

Right (from left to right): Bob Goldberg, Jerry Blaine and his wife, Marylin.

Bottom (right): Larry White, VP Sales (left), Scott Mccabe, President and CEO, Toshiba America Business Solutions, Inc.; Larry Weiss, President and CEO, Atlantic, Tomorrow’s Office.

Below: Phil Boatman, National Sales Manager, Lexmark International

• 36 •

Top (left): Austin DeMuth, Program Manager, U.S. Bankcorp; George Zurich, Director of Marketing, Konica Minolta Business Solutions, U.S.A., Inc., Kay Fernandes, VP, Strategic Business Development, Konica Minolta Business Solutions, U.S.A.; Paul Meyer, Director of Sales (left) and Phil Buysse, GM, U.S. Bankcorp

Above: Brian Ammons, President, Standard Office Systems, and his wife, Suzanne.

Left: Jim Fuchs, President and CEO, Fuchs Business Solutions; Jenna Mammoser, VP, Client Services, MWAi; John Brostrom, Sports Media; John Kuchta, President and CEO, SolutionOne.

Bottom (left): Helen (left) and Sandy, Co-owners, X Tech Systems

Below: Steve Galloway, CEO and President, ESP; Alan Nielsen, EVP Dealer Sales, Konica Minolta Business Solutions U.S.A., Inc.

• 37 •

Promotion

Where Electronics Protection Meets Asset Management”

Innovolt combines patented electronics protection technology with comprehensive monitoring and analytics applications to deliver the leading Intelligent Asset Management platform for the office equipment industry. Innovolt is the only provider that protects against all of the most commonly known disturbances and their resultant damaging effects in one solution. Our technology is proven to significantly reduce service calls, while increasing equipment uptime and improving customer satisfaction levels.

UP NEXT

• 38 •

After a whirlwind of dealer meetings in November that included Ricoh, Sharp, Toshiba and Konica Minolta, we begin to slow down for the holiday season. We hope that you, your families and employees enjoyed a very happy Thanksgiving. At press time, CJ Cannata will be heading to Las Vegas and Miami for the Business and Imaging Expo and the Nuance Analyst Summit respectively. Our December issue will cover the four aforementioned meetings some special features and late breaking news.

CR

CR

Above (from left to right): Dave Quint, President and CEO, Advanced Systems, Inc.; Chip Crunk, President and CEO (left) and Hunter McCarty, COO, RJ Young Company; Jeff Elkin, President and CEO, Advanced Business Systems; John Crunk, former President and CEO, RJ Young Company.

Top (right): Frank Cannata; Jennie Fisher, GM, GreatAmerica Financial Services; Ted LeBlanc, Director of Sales, Eastern Region, Toshiba America Business Solutions.

Right: Hiro Ueda, SVP, Business Development, MWAi; Ron Nevo, Senior Product Manager, Samsung Electronics Co., Ltd.; Steve Galloway